uk – Does a smartcard work next to a railcard?

I was recently made aware of smart cards that can be used on regional trains in the UK and that act much like an Oyster card boarding and alighting at the stations where you board and disembark (just like an oyster card) ,
So my question is: Can a Railcard (e.g. from the South Western Railway) be used in addition to a Discount Railcard (e.g. a Network Railcard or a 16-25 Railcard) to receive discount cards?

Additional question – How reliable are smart cards compared to paper tickets? I ask this because I am aware that a smart card holder has to get on and off a train station when boarding and alighting, and this would not be possible if the boarding / alighting points did not work for some reason.