How would encryption improve the security of a physical credit card?
You can't do crypto with dumb block storage.
But if you have a chip you should absolutely do _something_ smarter than storing and reciting the number verbatim.
I don't believe the majority of fraud is stolen physical credit cards
Why not allow plugging the card into the computer just like a yubikey for online payments? It would be quite difficult to pull off, but credit card companies can save a lot on fraudulent transactions if it is implemented.
And as for transactions on mobile phones, most of them have NFC as well; contactless payments could work there too.
In most countries, the card number is only used for online and phone transactions. There's probably no way to do better than this without abandoning cards entirely in favor of some kind of device (or app) that has enough of a user interface to do a human-readable challenge response.
we don't use a pin, because that doesn't help with fraud. most fraud is either online, or someone at the store, who can easily skim or see your pin. online you can use 3dsecure, which has a pin.
processing a transaction doesn't mean your money's gone. you can dispute any fraud charge for 2 months. so the pin doesn't do anything. and for bank accounts, where it's debit, and your cash is immediately taken out, we've had a pin since before europe had an atm card.
I think it's just not widely known about/common usage in the US even though the infrastructure seems to be widely there.
The rest of the world reached that point around 15 years ago, including countries with high credit card use (UK, France) and high debit card use (Northern Europe).