If you have received, a "must be .ico" error, chances are that the file you're attempting to upload into this field is actually a .png or .jpg file type.
Check your file
You can check a file's actual file type by uploading it into this file checker. It will let you know the actually file type.
Convert to .ico if needed.
To able to upload your favicon, you can run your file through an online favicon generator like this one or this one.
This will convert the image to .ico format.
After you're done converting the image, upload the generated .ico file in your custom branding page.