> Since when were payment networks latency sensitive?

Since the advent of e-commerce, POS-networking and fraud detection systems in 1990's-2000's.

User-facing and authorisation path are highly latency sensitive. It includes tap-to-pay, online checkout, issuer authorisation, fraud decisioning, and instant payment confirmation – even moreso for EFT payments.

> […] 2-5 seconds more from card presentation to getting approval back.

This is the mid-1990's level QoS when smaller merchants connected the acquirer bank via a modem connection, and larger ones via ISDN.

Today, payments are nearly instant in most cases, with longer than one-second card payment flows falling into the exceptions territory or inadequate condition of the payment infrastructure.