Note: To build custom thumbnails, a YouTube channel owner must enable access under its settings. Follow these steps here.
Once Intermediate features are enabled, you can then follow the below steps to create a custom thumbnail for a YouTube video.
Click on Publishing Tools > Video Studio from the left nav. Click the "+" icon in the top left corner, and then select Thumbnail Builder.
From the drop down, select your YouTube channel to view its videos. Then, click on the video you wish to build a thumbnail for.
Select Background on top right to start building your thumbnail. From here, you can choose a background color, grab a video still, edit opacity, or upload your own picture. You can also use the blue "+" on the top right to add a text box or image.
When it's ready, click "Publish Thumbnail" at the bottom. The video will update with the custom thumbnail.