Set custom notification icon using Picasso library.

PendingIntent pendingIntent = PendingIntent.getActivity(context,
uniqueIntentId, intent, PendingIntent.FLAG_CANCEL_CURRENT);

final RemoteViews remoteViews = new RemoteViews(context.getPackageName(), R.layout.remote_view_notification);
remoteViews.setImageViewResource(R.id.remoteview_notification_icon, R.mipmap.ic_navigation_favorites);

Uri defaultSoundUri = RingtoneManager.getDefaultUri(RingtoneManager.TYPE_NOTIFICATION);
NotificationCompat.Builder notificationBuilder =
        new NotificationCompat.Builder(context)
                .setSmallIcon(R.mipmap.ic_navigation_favorites) //just dummy icon
                .setContent(remoteViews) // here we apply our view
                .setAutoCancel(true)
                .setContentIntent(pendingIntent)
                .setPriority(NotificationCompat.PRIORITY_DEFAULT);

final Notification notification = notificationBuilder.build();

if (android.os.Build.VERSION.SDK_INT >= 16) {
    notification.bigContentView = remoteViews;
}

NotificationManager notificationManager =
        (NotificationManager) context.getSystemService(Context.NOTIFICATION_SERVICE);

notificationManager.notify(uniqueIntentId, notification);

//don't forget to include picasso to your build.gradle file.
Picasso.with(context)
        .load(avatar)
        .into(remoteViews, R.id.remoteview_notification_icon, uniqueIntentId, notification);

<?xml version="1.0" encoding="utf-8"?>
<LinearLayout
    xmlns:android="http://schemas.android.com/apk/res/android"
    android:layout_width="match_parent"
    android:layout_height="wrap_content"
    android:background="@android:color/white"
    android:orientation="vertical">

    <ImageView
        android:id="@+id/remoteview_notification_icon"
        android:layout_width="60dp"
        android:layout_height="60dp"
        android:layout_marginRight="2dp"
        android:layout_weight="0"
        android:scaleType="centerCrop"/>
</LinearLayout>