Wallace has been superb for Rangers this season and his outstanding play was recognised by Gordon Strachan when he was called into the national squad earlier this month.
Despite playing his club football in SPFL League One, the left-back came on as a substitute in the World Cup qualifier against Macedonia in Skopje.
And he capped his return to the international fray after a 15-month absence by nearly scoring a late goal in a memorable 2-1 victory.
The 26-year-old defender is hopeful he can continue to perform well for both his club and country in the months ahead.
He believes the presence of Smith, who returned to former club Rangers in the summer, at Ibrox will help him to maintain his high standards.
The ex-Norwich City, Preston North End and Portland Timbers ace is, also like Wallace, a left- back.
And his team-mate believes having the vastly experienced Scot piling the pressure on him will be hugely beneficial for his play.
"I think that, first and foremost, it helps the team that Stevie has joined as he has got great qualities and can play in a variety of positions throughout the team," enthused Wallace.
"Stevie has been through the course with this club before as well and knows the high standards which are expected by the supporters here.
"He played a part in the club's successes first time around. He was a key figure in their league and cup victories for several years.
"It is mainly to the benefit of the team that he has come in. But, of course, he is going to add competition for myself individually and that is great for me.
"I think you need that. I didn't really have that so much last year. It should hopefully help me to keep playing to a decent standard for the remainder of the season."
Rangers boss Ally McCoist has picked Smith in left- midfield and Wallace at left-back in his side's last two games against Queen of the South and Forfar Athletic.
Wallace has enjoyed linking up with the 28-year-old and believes they can form a decent partnership in the weeks and months ahead.
He reflected: "It is good that we are both in the team at the moment because we know that we can play beside each other.
"If I go higher up the park I know he will drop back and cover in for me. That is natural for both of us. It is certainly a plus point."
Wallace, meanwhile, has revealed how the arrival of Bilel Mohsni at Rangers this summer has allowed him to overlap more.
The French-Tunisian centre-half has established himself as a fans' favourite since being drafted into the team earlier this month.
He enjoys pushing forward and attacking - in a similar style to former Gers stoppers Lorenzo Amoruso and Madjid Bougherra.
And the 26-year-old has netted against both Arbroath in a League One game at Ibrox and Queen of the South in a Ramsdens Cup match at Palmerston Park.
The predilection for throwing caution to the wind and haring upfield increases pressure on his team-mates to cover for him at the back.
However, Wallace is keen for the former Southend and Ipswich Town star to play his natural game whenever possible.
And believes both he and Rangers, who take on Stenhousmuir in the league on Saturday, will benefit if he does so.
He commented: "We noticed right away that Bilel liked to get himself forward when he came into the club during pre-season. It was certainly different to what we had been used to.
"But if he does it at the right times and there is cover in the right areas then he can certainly go and do that. He has got great qualities and he should utilise them.
"Bilel is an animal of a boy. He has got great physical attributes and is a good athlete for a centre-half, which is really good for us.
"I enjoy playing next to him because it allows me to get that bit higher to my opponent because I know he is going to have the strength and the character and the discipline to cover me."
Wallace, though, knows the all-round team performance in the narrow 1-0 win over Forfar at Station Park on Sunday was anything but great.
And he is hopeful that, collectively and individually, Rangers play far better against Ramsdens Cup semi-final opponents Stenhousmuir this weekend.
He stated: "Yes, we were not at our best at the weekend. But the important thing when that is the case is to pick up all three points and we did that.
"We have been focusing on producing an improved performance this weekend in training this week and hopefully that is what we will succeed in doing at Ibrox."