Will a smartcard work alongside a railcard?

I have recently been made aware of smartcards that can be used on regional train services in the UK that act in a similar way to an Oyster card – You load on tickets (similar to loading credit onto an Oyster card) and you then have to tap in and tap out at the stations you enter and leave the railway at (just like an oyster card.) My question therefore is this, Can a smartcard (for example, from South Western railway) be used alongside a discount railcard (such as a network railcard or a 16-25 railcard), therefore getting discount tickets?

Additional question – How reliable are smartcards when compared to paper tickets? I ask this as I am aware that a smartcard holder has to tap in and tap out when entering and leaving stations, and this would not be possible if the tap-in/tap out points are not working for whatever reason.